1 The TTIP Jean Monnet Chair, University of Miami Miami-Florida European Union Center Argentine Council of Foreign Relations (CARI) Cover.indd 1 Joaquín Roy and Roberto Domínguez (editors) Contributors Olufemi Babarinde Javier Bonilla Saus Christopher Coffman Roberto Domínguez Carolyn M. Dudek Michelle Egan Kurt Hübner Pedro Isern Finn Laursen Antonio de Lecea María Lorca Carlos Malamud Joseph A. McKinney Tamas Novak Félix Peña Joaquín Roy Federico Steinberg Gustavo Vega Katja Weber George Zestos The TTIP The Transatlantic Trade and Investment Partnership (TTIP) is the agreement currently under consideration between the European Union and the United States. It has the objective of removing trade barriers, tariffs and other restrictions on economic exchange between the two formidable blocs. The plan is nothing new. In effect, it can be traced back to the beginning of the EU and its relations with the US. It has been the subject of discussions and research on both sides of the Atlantic. Today, the EU-US economic relationship accounts for more than 30 percent of global trade in goods and 40 percent of global trade in services. The two actors are each other s main trading partners for goods and services, and together they control the largest bilateral trade relationship in the world. The overall transatlantic workforce is estimated to be 15 million workers about half in the US and half in the EU who owe their jobs directly or indirectly to companies across the Atlantic. The two economies also provide each other with the most important source for foreign direct investment. In fact, the US invests three times more in Europe than in all of Asia combined. This volume studies the plan of the TTIP in depth and points out the impact on other regions of the world. It also discusses similar alliances made by the two partners. The Transatlantic Trade and Investment Partnership between the European Union and the United States Joaquín Roy and Roberto Domínguez (editors) 3/19/14 11:19 AM
2 The TTIP Jean Monnet Chair, University of Miami Miami-Florida European Union Center Argentine Council of Foreign Relations (CARI) Cover.indd 1 Joaquín Roy and Roberto Domínguez (editors) Contributors Olufemi Babarinde Javier Bonilla Saus Christopher Coffman Roberto Domínguez Carolyn M. Dudek Michelle Egan Kurt Hübner Pedro Isern Finn Laursen Antonio de Lecea María Lorca Carlos Malamud Joseph A. McKinney Tamas Novak Félix Peña Joaquín Roy Federico Steinberg Gustavo Vega Katja Weber George Zestos The TTIP The Transatlantic Trade and Investment Partnership (TTIP) is the agreement currently under consideration between the European Union and the United States. It has the objective of removing trade barriers, tariffs and other restrictions on economic exchange between the two formidable blocs. The plan is nothing new. In effect, it can be traced back to the beginning of the EU and its relations with the US. It has been the subject of discussions and research on both sides of the Atlantic. Today, the EU-US economic relationship accounts for more than 30 percent of global trade in goods and 40 percent of global trade in services. The two actors are each other s main trading partners for goods and services, and together they control the largest bilateral trade relationship in the world. The overall transatlantic workforce is estimated to be 15 million workers about half in the US and half in the EU who owe their jobs directly or indirectly to companies across the Atlantic. The two economies also provide each other with the most important source for foreign direct investment. In fact, the US invests three times more in Europe than in all of Asia combined. This volume studies the plan of the TTIP in depth and points out the impact on other regions of the world. It also discusses similar alliances made by the two partners. The Transatlantic Trade and Investment Partnership between the European Union and the United States Joaquín Roy and Roberto Domínguez (editors) 3/19/14 11:19 AM
3 The TTIP: The Transatlantic Trade and Investment Partnership between the European Union and the United States Joaquín Roy and Roberto Domínguez (editors) Miami-Florida European Union Center/Jean Monnet Chair, 2014
5 The TTIP: The Transatlantic Trade and Investment Partnership between the European Union and the United States Joaquín Roy and Roberto Domínguez (editors) Preface by Antonio de Lecea With the special editorial assistance of Dina Moulioukova Miami-Florida European Union Center Jean Monnet Chair, 2014 Co-edition by Argentine Council of Foreign Relations (CARI) Buenos Aires, Argentina Contributors Olufemi Babarinde Javier Bonilla Saus Christopher Coffman Roberto Domínguez Carolyn M. Dudek Michelle Egan Kurt Hübner Pedro Isern Finn Laursen Antonio de Lecea María Lorca Carlos Malamud Joseph A. McKinney Tamas Novak Félix Peña Joaquín Roy Federico Steinberg Gustavo Vega Katja Weber George Zestos
6 The Miami-Florida European Union Center of Excellence A Partnership of the University of Miami and Florida International University and The Jean Monnet Chair of the University of Miami The Miami-Florida European Union Center of Excellence (M-FEUCE) is one of the 10 Centers of Excellence supported by the European Commission at universities throughout the United States, as part of a broader effort to promote contacts across the Atlantic. Thus, these EU Centers promote the study of the EU, its institutions and policies and EU/US relations through teaching programs, scholarly research and outreach activities in their local and regional communities. The Jean Monnet Chair of European Integration, awarded by the European Commission s Jean Monnet Action of the General Directorate of Education and Culture in 2001 to the University of Miami, has been exclusively dedicated to strengthen the teaching and research of the EU, with a strong specialization on its relations with Latin America and the Caribbean and comparative regional integration. In 2011, chair was awarded ad personam Miami Florida European Union Center University of Miami 2300 Campo Sano Building, 220C Coral Gables, FL Phone: Fax: (305) Web: Jean Monnet Chair Staff Joaquín Roy (Director) María Lorca (Research Associate) Maxime Larivé (Research Associate) Dina Moulioukova (Assistant Editor) Florida International University Rebecca Friedman (Co-Director) International Jean Monnet Chair Editorial Advisors: Philippe de Lombaerde, UNU/CRIS, Brugge, Belgium Michelle Egan, American University, Kurt Hübner, University of British Columbia, Vancouver Finn Laursen, University of Southern Denmark John McCormick, Indiana University, Purdue Félix Peña, Universidad Nacional de Tres de Febrero, Argentina Manuel Porto, University of Coimbra, Portugal Lorena Ruano, CIDE, Mexico Eric Tremolada, Universidad del Externado de Colombia Roberto Domínguez, Suffolk University, Boston Francesc Granell, University of Barcelona Printed in the United States by Thomson-Shore, Inc. Copyright 2014.Jean Monnet Chair/University of Miami. All rights reserved. No portion of the contents may be reproduced in any form without written consent of the publisher.
7 Contents Preface EU-US Partnership: More Relevant than Ever? Antonio de Lecea Delegation of the European Union in the United States 1 Introduction The European Union and the United States: an Odd or a Happy Couple? Crises, Hope and the Impact of Regional Integration Joaquín Roy University of Miami. 7 I. Background and setting Is TTIP Really that Different? Michelle Egan American University.. 19 TTIP: Opportunities and Challenges for the EU Kurt Hübner University of British Columbia, Vancouver.. 35 Politics and Philosophy beyond Economics and Commerce Javier Bonilla Saus and Pedro Isern Universidad ORT, Montevideo, Uruguay Transatlantic Economic Integration George Zestos and Christopher Coffman Christopher Newport University, Virginia Challenges on the Way to a Transatlantic Trade and Investment Partnership Joseph A. McKinney Baylor University, Texas. 85
8 II. Special issues The Automotive Sector in light of the Free Trade Agreements between the EU and North America Roberto Domínguez Suffolk University, Boston Genetically Modified Foods and Trade Controversy Carolyn M. Dudek Hofstra University, New York City The Euro, the Dollar and the TTIP María Lorca University of Miami III. The Western Hemisphere The EU's Transatlantic Trade Policy: Why the move towards FTAs? The Track Record So Far Finn Laursen University of Southern Denmark, Odense The TTIP, NAFTA and Mexico Gustavo Vega El Colegio de México The TTIP and Mercosur Carlos Malamud Universidad Nacional a Distancia/Instituto Elcano The Negotiation of the TTIP: a Preliminary View from the Deep South Félix Peña Universidad Nacional de Tres de Febrero, Argentina 185 IV. The Wider World Underlying Geopolitical Motives of the TTIP: Leadership of the Transatlantic Axis Federico Steinberg Institute Elcano/Universidad Autónoma, Madrid
9 Implications of TTIP on Global Economic Integration of Central and Eastern Europe Tamas Novak Austrian Marshall Plan Foundation/ Center for Transatlantic Relations (SAIS). 209 Short- and Long Term Implications of TTIP for Southeast Asia Katja Weber Georgia Institute of Technology Implications of the TTIP for Africa: a Conjectural Analysis Olufemi Babarinde Thunderbird School of Global Management About the Authors.. 253
13 The EU-US trade and investment before and after TTIP: What can Latin America expect from it? Antonio de Lecea Delegation of the European Union The EU-US economic relations before TTIP The economic relationship between the EU and the US is the largest in the world. We are the world's largest importers, making up just under a third of the total. In 2010, bilateral trade in goods alone was worth $546 billion. Our two economies also provide each other with our most important sources of foreign direct investment. Close to a quarter of all EU-US trade consists of transactions within firms based on their investments on either side of the Atlantic. In fact, U.S. investment in Europe is more than three times more than in all of Asia combined. Trade and investment brings also jobs. The overall transatlantic workforce is estimated at 15 million workers about half in the US and half in the EU who owe their jobs directly or indirectly to companies from the other side of the Atlantic. This impressive degree of integration is the result of a high level of openness on both sides. But there are still some serious obstacles that hinder trade and investment between the two blocks. Some of these obstacles are classical market access issues. Average tariffs for EU-US trade are indeed low, on average a 4 per cent on imports, but in sectors like motor vehicles or processed foods they are 8 per cent or higher. Moreover, EU firms cannot bid for public contracts funded by a number of states in the US. And tariffs are not the only barriers to trade. Differences in technical regulations, standards and certifications are estimated to add between 10 and 20 per cent to the current cost to business and consumers. For example (i) The EU and the US have formally different safety requirements in relation to auto parts like lights, door-locks, brakes, steering, seats, seat-belts and electric windows. Yet both systems deliver similarly high levels of protection. (ii) Both sides have engaged in reforming financial markets regulations to improve financial stability in accordance with the G20 agreements. Yet some diverging implementing rules of these agreements distort financial flows or add unnecessary costs to them. (iii) Exports of energy and raw materials from the US to the EU are bound by restrictive rules.
14 2 de Lecea What do we expect after TTIP? First, TTIP is intended to cut industrial and agricultural tariffs, and to open services and public procurement markets. Second, we expect that regulators coordinate better when they design regulation for new products or update regulation of existing products. We aim at getting rid of double inspections at our pharmaceutical or medical devices plants. We aim at simplifying the procedures for approving food products and avoid duplication of inspections in areas where our product safety rules are equivalent. And we aim at making sure that we implement agreed international rules on finance in a compatible way. Third, TTIP provides a laboratory for future global disciplines. Last year's Bali agreement has brought new momentum back to the WTO. But even if we manage to meet all of Doha's goals, gaps in the multilateral rulebook will still remain. The role of TTIP is therefore to pioneer global rule-making solutions that can later be applied more widely especially as they will already be operating in 40% of the world economy. On these issues the truth is that the EU, the US and Latin America share much more than where we differ. TTIP strengthens the position of our shared values on the global stage. What can Latin America expect from it? TTIP will bring benefits beyond the EU and the US. A study commissioned by the European Commission estimates that the agreement could increase GDP in our trading partners by almost 100 billion euros. An overall increase in GDP and in income for households in the EU and the US will result in higher demand, not only for goods and services produced in the EU and the US but also for raw materials, components and other inputs from elsewhere in the world. Given that the EU and the US together make up 46% of the world economy and that our economies are some of the most open, this will have a noticeable impact on demand for exports from other countries around the world. More convergence between EU and US standards, regulations and conformity assessment systems should make life easier for exporters in the rest of the world. In some cases they may be able to cut down on the number of their production lines. In other they may incur lower administrative costs because the EU and US authorities agree to recognize the results of each other's inspection teams. We experienced that with the creation of the European Union s Single Market. A unified set of European rules benefitted not only EU firms but also American and Japanese exporters. The same can happen though likely to a lesser extent if EU and US rules are made more compatible.
15 What to expect? 3 How much each country will benefit depends on several factors, namely the complementarity of their exports pattern, the degree of economic integration and of regulatory convergence with the EU and the US. As regards integration, our relationship is already very close in many fields. Crucial ties exist both at the bi-regional level and between the EU and the individual LAC countries. The EU is the second trade partner for the region. EU- LA trade in goods more than doubled over the last decade, reaching 202 billion. The Union remains the leading foreign investor in LAC, accounting for 385 billion (43% of the region s total) of foreign direct investment stock in EU FDI in Latin America and the Caribbean is higher than that in Russia, China and India combined. And FDI has also started to flow from Latin America and the Caribbean towards Europe reinforcing the trend towards more symmetrical economic exchanges. The trade and investment agreements that we have concluded between the EU and the sub-regions and countries of Latin America and the Caribbean are a big step towards reaping the still untapped potential. The dialogues and cooperation mechanisms of these agreements can help regulatory authorities to build up close relationships of trust with their counterparts in the United States and the European Union, and conclude regulatory cooperation arrangements that will magnify the benefits from TTIP. To sum up, Latin America and the Caribbean have much to gain from an ambitious and ground-breaking Transatlantic Trade and Investment Partnership. How much will depend on how close these partner countries wish to integrate their economies with those of the EU and the US and work with them towards high global rules standards.
19 The European Union and the United States: an Odd or a Happy Couple? Joaquín Roy University of Miami A short speculative history Although most observers would agree that comments made in the news become irrelevant in the course of history, one made by Governor Romney during his candidacy for President is still relevant in this compilation. Romney accused his competitor, President Obama, of trying to convert the United States into a European state. This claim still serves to point out the need for a much deeper understanding of both entities; it also takes for granted the importance of a close alliance between the two in order for them to make considerable development in the future. However, this alleged link is riddled with confusion and stereotypes. This relationship is considered a normal fact forged by mutual historical legacies. Hence the frequent occurrence of awkward transactions and misunderstandings, dismissed with the expectation that any damage will be corrected by the terms of their special relationship. If conflicts are detected, both parties are said to be condemned to agree. If a lack of knowledge is perceived, it will be modified by accessible means. Mechanisms for an understanding and cooperation are within reach. Therefore, an effective relationship is not utopian. However, there are areas in which much work is needed to strengthen the alliance and correct its shortcomings. There is a need, not only for agreements in economic and political issues, but also for a deeper understanding of the essence of both entities. The Twentieth Century has been dominated by a series of events, competing ideologies and historical milestones in inter-state relations. Among the most important are two World Wars, the rise and fall of extreme ideologies that left a tragic mark, and a trans-continental relationship that intimately fused the war contestants. This ongoing relationship has been maintained in spite of some politically incongruent views between both continents. However, what seems to be normal presents profiles and angles with variable dimensions that require an adjustment in the analysis, even more in the current times, in the fading away of what was called the American century. Both parties in this apparent marriage of convenience propelled by their dependency for one another s partnership are different in their essential DNA. They contrast in their structure, but similar in fashion, not exempt from all sorts
20 8 Roy of difficulties. In spite of all this, the alleged solid relationship between Europe and the United States is considered exempted of serious discrepancies. Both partners seem to respond to similar values, interests and objectives. However, they have a different personality. There is a need to distinguish two expressions that are wrongly considered as synonymous. Europe responds to a geographical or cultural identification, while the European Union is, at the moment, a juridical entity, which enjoys full personality as international subject since the Treaty of Lisbon. Before that, according to the orthodoxy of international law, the EU did not exist. Only the European Community, more exactly the European Economic Community (EEC), was able to operate in the world scene through the Commission in the areas assigned to its structure. But the EU could not be a nation of cultural or ethnic fashion without the requirement of will to belong, according to the profiles of nationalism forged by lineage and blood of individuals ( nationals ). The EU (and its predecessors) is an entity composed of sovereign States that are bound together by will. They were not forced by conquest, war or political pressure. The EU would then be more similar to a civic or liberal nation. At the other side of the pond, an entity with an ambiguous name (the United States of America) has a defined profile and precise international personality, an active subject of international law. This explains why the American mind believes that the United States is actually an idea, based in a sentiment of exceptionality, the most successful civic nation in history. But the ambiguity of the label United States reveals ambivalence and confusion to speakers of other languages. For example, in Spanish it is a widespread custom to refer to los Estados Unidos, in plural, taking a verb in plural. However, in recent years, the style books of major newspapers have recommended the use of the singular Estados Unidos, an apparently plural grammatical subject used with verbs in singular ( Estados Unidos es un gran país ). The firm conviction of the solidity of this political entity is proven by the simple fact that in English, grammatically the country name that is plural), is accompanied systematically by verbs in singular, such as the United States is a rich country. This peculiarity, according to traditional sources, was not always this way. Before the Civil War, American English said the United States are very powerful. Nevertheless, spot-on comments and rigorous studies identify the United States as a defined territory, with a federal structure, composed of States (heirs of British colonies that won independence by will in 1776), people that acquire citizenship of the United States directly (not as in a confederation as in the EU), with common institutions, elections by universal suffrage, and the trappings of international recognition. In contrast, doubts arise on the personality of Europe. Its existence is questioned, its geographical limits are labelled as ambiguous (especially in the East), and its shared values and interests are scrutinized. While Americans apparently know who they are, Europeans seem content with knowing who they are not. Europe, at least, is not Africa or Asia, even though some citizens of these two continents may share sentiments for European values.
21 Odd or Happy? 9 From the preceding arguments one can conclude, in contrast with the belief that both entities (the United States and the European Union) respond to a different personality, they have similar goals to belong, a wish to join. One is an American (meaning an individual of the United States), juridically and sentimentally, by an individual decision. Even though recently arrived persons may not internally adopt all and each one of the ingredients of the U.S. faith, they cannot be denied the right to exercise it according to personal convenience, provided it is done within the law. The European Union, composed not by individuals but by States, has also similar foundations born out from a will to join. The citizens of these countries acquire also this condition voluntarily, although in an indirect fashion by the decision taken by their corresponding States of which they are citizens. They cannot, juridically, accede to have the European (more accurately, European Union) citizenship in the same fashion as U.S. citizens received theirs. Citizens of Europe do not need to go through a previous filter of meeting the citizenship requirements, as necessary for any given state. European (read EU ) citizenship is in reality a hybrid condition, best illustrated by the burgundy covers of EU member states issued passports. But in both cases, American and European, a wish to join makes possible the recommitment to a political entity to which one believes to belong. In Europe this quality is taken for granted by the unstoppable force of history. In the European setting one finds the significant case that in France, in the aftermath of the Revolution, it was the State that made the Nation. In the case of the EU, this entity was formed to give legal sense and political personality to Europe, a cultural entity, whose destiny and survival were put in question by the quasi suicidal of World War II. However, the EU plays some roles of a State (via its common policies). While Europe then can be considered as a cultural nation, that has a common sovereignty shared in diverse degrees, the EU would be the State, a structure formed by institutions and laws that provide economic consistency to the nation. In the future, these two lines ( Europe and the EU ) may merge, as in a standard Nation-State. In contrast, or as in a later stage, the United States enjoys both dimensions: nation and state, an example of classic nation-state. For Europe and the EU, the United States is a unitary actor, equipped with sovereign decisions at the federal level; for the United States, the EU is equalized with Europe. At the same time, Europe is for Washington a badly connected series of States with which one has to deal in crucial issues. It may even be convenient to carry out this task individually with some States, avoiding the complicated maze of the EU, or even questioning it in a rather problematic fashion. Let s remember that when Henry Kissinger allegedly asked for the telephone of Europe, he meant of the number to call the EU. Nonetheless, still today, after the establishment of the position of High Representative of the Common Foreign and Security Policy (CFSP), when sensitive security topics are addressed, Washington prefers to set them in the context of NATO or in a bilateral deal with a given country. Regrettable, Europe and the EU hardly exist for
22 10 Roy that strategic and geopolitical mind of the United States. While this shortcoming in Trans-Atlantic relations is not solved, problems of understanding will remain. 1 What then should be the priority of any president of the United States? First, Washington should decide what kind of European Union is the best interest for the United States. A general gift list issued by numerous U.S. think-tanks and observers concur that what is urgently needed is an EU (and Europe) complete (an even closer union). It should be free of all the old evils that led to intolerance and racism. Finally, the EU/Europe should be not only in peace, domestically, but exerting its influence in its immediate vicinity and later in the rest of the world. For this second stage scenario Europe needs to play a model role along the United States. The U.S. leadership needs to be convinced that a policy of divide and conquer should be avoided at all cost. To believe that what is bad for Europe and the EU, in a zero sum game, is good for America is not practical, if not counter productive and suicidal. But Europe has to respond and decide to close the gap, beginning with rewiring the lines of the telephones, set the economic house in order, and project an effective face to the rest of the world. Issues, disagreements, recommendations As privileged partners, mutually respecting and trusting each other, Washington and the EU have had and still have disagreements and misgivings not only on economic and environmental details (agricultural subsidies, food processing, banana trade regimes), but also on sensitive fundamental issues. In this terrain, general and concrete dimensions are interlaced. National security and the defense of human rights in the world, arms embargo on China, subsidies for Boeing and Airbus, defense budgets, and procurement contracts for weapons systems, are some of the sources for conflicts. As a consequence of the so-called war on terror, some European countries became involved in the illegal transfer of detainees and the imprisonment of alleged authors or accomplices of crimes. This has created internal controversies in some affected countries, whose governments have been pressured by the internal opposition for caving in to the expectations and demands of Washington. The two terms of George W. Bush were plagued by such disagreements. In the case of principles that are considered indisputable in Europe, but that in the US are considered conditioned by state legislation and rules of the Supreme Court, there is a frontal clash on the death penalty. Among the collateral consequences, a major problem is posed by the prohibition of deportation of alleged criminals to the US, running the risk of application of the capital punishment. Another point of contention is the rejection of the United States to recognize the jurisdiction of the International Criminal Court. Washington is afraid that US soldiers could become targets of trials for political reasons. As a consequence of the restrictions to enter US territory after the 2001 attacks, the US has indicated at times its intention to demand visas for all (or se- 1 For an expanded bi-regional set of recommendations, see Hamilton 2010.
23 Odd or Happy? 11 lected) EU citizens. Although Brussels have indicated an intention for retaliation, the decision has never materialized. Despite the fact that the US and European countries share the common goal to reach an agreement on the Palestine territories, they believe in taking two different approaches. In practice, Europe is more complacent than Washington on the Palestinian actions, while the Americans justify the Israeli actions to the extreme of a systematic veto in the Security Council. While Washington justified the option of a preventive attack on Iran under the suspicion of use of nuclear weapons, the Europeans preferred diplomatic negotiation. The war in Iraq marked the height of disagreement between the European governments and Washington (with the exception of the British and assorted EU members). The latest source of confrontation was the discovery of spying systems performed by the United States, with no discrimination of allies and foes. The general theme of transatlantic relations, topic of an extensive literature for over half a century, is the frequent subject of recommendations offered by single authors and distinguished scholars, commissions, think tanks, ad-hoc meetings, and seminar and conference proceedings. Sometimes, groups are composed exclusively by academic figures, and others by government agents. Although results of a consensus are often inconclusive, the documents are most effective when drafted by a team composed of scholars, retired officials and different observers. 2 An example of this endeavor of searching for a transatlantic relations literature is still valid in the setting of this volume and it is the subject of reflection. A compilation by an impressive team of think tanks gathered by the Center of Transatlantic Relations of Johns Hopkins University (SAIS) still sheds considerable light to the debate. 3 European and American participants examined the danger that what already called the Transatlantic Partnership was vanishing. However, the legacy of that effort still survives in a world where the borders of the national and the international are blurred. The reality is that, when there is a disagreement, both actors cannot accomplish in isolation the goals that were set. There is no world-wide coalition that functions satisfactorily. Europe and the US cannot solve problems that go beyond their borders. But in association with other agents, success can be reached. Together, Americans and Europeans need to position their economies, keep a free and open Europe, face conflicts effectively, oppose the proliferation of nuclear weapons, and preserve the fragile planet environment. However, there is a lack of concurrence in the nature of the challenges, the capacity of the institutions, and the tools available. There is a need for a solid cooperation between the United States and Europe, in order to convert the simple relationship into a strategic link. 2 As examples published in recent years, see Wahlers, Serfaty, Anderson and Dorman. 3 See again Hamilton 2010.